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Crypto Users Lose $2B in 2023, Half of Previous Year: De.Fi Report

Navigating Crypto Perils: Insights from De.Fi's 2023 Annual Report on Losses, Recovery, and Emerging Threats.

by Alexander
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In the past year, cryptocurrency users faced nearly $2 billion in losses due to scams, rug pulls, and hacks, marking a significant decrease from 2022’s $4.2 billion. Annual report of De.Fi sheds light on the evolving landscape, emphasizing improved security measures but warning about ongoing susceptibility to risks.

Improved Security Measures Contribute to Reduction in Losses

The reported decrease in losses is attributed to enhanced security protocols, heightened community awareness, and an overall decrease in market activity. Despite these positive trends, the crypto industry remains exposed to security risks, indicating a need for sustained vigilance and innovation in security practices.

Bear Market Conditions and Recovery Rate Improvement

The reduction coincided with a bear market that saw major alternative tokens slump by as much as 85% from their 2021 peaks. However, recent months witnessed a recovery as market conditions turned more bullish. Notably, the recovery rate of funds improved significantly, reaching around 10%, a marked improvement from the 2% recorded in 2022, according to De.Fi.

Blockchain-Specific Losses: Ethereum, BNB Chain, zkSync Era, and Solana

Ethereum, being the largest blockchain by active users and value locked, experienced the highest losses, totaling about $1.35 billion across approximately 170 incidents. The expansive Ethereum ecosystem and high-profile projects make it an attractive target for malicious actors.

BNB Chain was also targeted, with losses amounting to $110.12 million across 213 incidents. Emerging networks like zkSync Era and Solana faced losses of $5.2 million and $1 million, respectively, highlighting the varied risks across blockchain ecosystems.

Losses on Centralized Platforms and Noteworthy Cases

Centralized platforms, including exchanges and trading platforms, reported losses of approximately $256 million across seven cases. The largest incident occurred in November when Poloniex was attacked, resulting in a substantial loss of $122 million.

Key Methods of Exploitation: Access Control, Flash Loans, and Exit Scams

Access control exploits emerged as the most damaging method, resulting in losses exceeding $852 million across 29 instances. These exploits take advantage of weaknesses in smart contracts or platform permissions, granting unauthorized access to funds or critical functionalities.

Flash-loan attacks ranked as the second-most lucrative method, leading to losses of $275 million over 36 cases. Exploiting the uncollateralized loan feature in DeFi, attackers borrowed significant amounts without upfront capital, manipulating market prices and exploiting vulnerabilities.

Exit scams accounted for $136 million across 263 cases. In this type of exploit, rogue developers drain liquidity from a token or disappear after raising funds from unsuspecting participants.*

Report by De.Fi underscores the dynamic nature of crypto risks, emphasizing the need for ongoing vigilance and proactive security measures within the ever-evolving cryptocurrency landscape.

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